Business Loans

Business, however small or large, it is bounded by financial
wag. All businesses require some form of financing. An essential part
of beginning or expanding a business is raising sufficient capital. Be
it a new product launch or the time of recession, the expenditures can't
wait till the payments come. In such situations, business loans alleviate
your way and open the world of new business heights for you.

Business loans can be termed as a popular category of
loans offered by various banks to self employed professionals, firms or
corporate. The main aim of a business loans is to help them to start
or expand their commercial activities. The quantum and interest of
loan may be vary from bank to bank. Generally, no security is required
for business credit up to a certain limit. Above the limit, there require
a collateral security or a percentage of business loans as margin, in
the form of fixed deposit in the bank. Business loans are similar to an
overdraft and are available like a limit on current account.

Types of Loans :

Business Loans come in many type hence it is essential for
a businessman to know exactly what type of loan is best suited to meet
his needs. Business Loans are mainly in two types: Professional Loans
& Trade Loans.

Professional Loan :

Leading Banks offer Professional loans to self employed
professionals like Doctor, Chartered Accountant, Interior Decorator, Architect,
Company Secretary, etc for the purpose of purchasing equipment, repairing
or renovating existing equipment and/or for working capital requirements
or clearing up the existing high cost debt from other banks. Professional
loans are unsecured in nature and will not be given to manufacturing,
trading or industrial units. The quantum of loan varies from Rs.25,000/-
to Rs.25 lakhs depending up on the age of the applicant, financial backgrounds,
repayment capacity, tenure of the loan (maximum 5 years), etc. The
interest rate is calculated on diminishing balance, the fixed or fluctuating
basis. The repayment is made through EMI and in some cases, a collateral
security has to be provided for limits above Rs.25,000/-.

Documents which are required for Professional Loans are:

Loan holder should submit his Proof of Identity ie;
Copy of his Passport or Voters ID Card or Driving License.

He also to submit his Ration Card or Telephone bill
or Electricity Bill or his Passport for the Address Proof.

Latest 6 months Bank Statement or Bank Passbook.

Latest Income Tax Return, along with computation
of income.

Balance Sheet and Profit & Loss Account for the
last 2 yrs, certified by a Chartered Accountant.

Qualification Proof of the Highest Professional Degree.

Trade license /Establishment /Sales Tax Certificate
for the Proof of Continuation of his profession.

Other Mandatory Documents: As a Sole Proprietorship
its Declaration, As a Partnership its Copy of Partnership Deed, Apart
from Copy of MOA, AOA & Board Resolution etc.

Even if its the time of recession or not, most of the
traders or businessmen need financial support to begin a new business
or expanding the existing one. They might be in need of a heavy investments
so banks are now ready to provide trade loans. Just like the professional
loan, the amount of loan offered to them is depending up on age of the
customer, financial background, repayment capacity, tenure of loan etc.
Credit line may be in the form of overdraft or term loan. The maximum
period and amount can be offered is 5 years and Rs 100 lakh respectively.
Trade loans is repayable through Equated Monthly Installments or EMI.
In few cases, a collateral security in the form of mortgage of land and
building will be required. Apart from that, National Savings Certificates,
Government Bonds, Bank's Term Deposits, Assignment of Life Insurance Policies,
Approved Shares & Bonds (in the name of borrower/proprietor/partner/director)
are also acceptable. Interest rate is fixed on the basis of prime lending
rate but varies from bank to bank as per their policies.

Documents which are required for Trade Loans are:

Proof of business existence for at least two years.

Financial Statements including Balance Sheet and Profit & Loss
Statement for the
last three years.